NSW inquiry finds data centre approvals ignore combined impacts, rejects moratorium

A cross-party inquiry in New South Wales has concluded that the state's data centre approvals did not weigh the combined demands of projects on resources and infrastructure. The committee nonetheless stopped short of urging a halt to new approvals. According to minutes attached to the report, members of the Public Accountability and Works Committee voted 6-1 to drop recommended state and national moratoriums.

The report said the state had no coherent strategy for handling the boom's effect on water, electricity and infrastructure. It cautioned that existing guidelines may set future power demand too low and understate limits on water supply, and that facilities placed close together could strain infrastructure. In the committee's words, the planning framework treats data centres "primarily as individual developments despite many impacts being cumulative in nature".

Instead of a pause, the committee asked for a comprehensive data centre strategy and tighter coordination among those involved in the approvals pipeline. The dropped proposals would have kept the pauses in place until the social and environmental harms were fully understood.

Chair Abigail Boyd, a Greens member of the state's upper house, cast the lone vote to retain the moratorium recommendations. In the report's foreword she described an "AI-fuelled data centre frenzy" that threatened to use huge volumes of energy and water. She also argued that governments had been taken in by an AI-driven scheme to get rich quickly, adding: "But it's a false economy."

NextDC and OpenAI are waiting on approval for a data centre in the state. Residents in one suburb have already led to a smaller project being withdrawn, and a state election is due in March 2027. Reuters reported that the inquiry reflects a wider tension for lawmakers, who want a share of an AI buildout that McKinsey estimates will be worth $7 trillion by 2030 while communities resist.